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Best Stocks For Options Trading

20 July 2022

Options trading in India has become more popular than ever because it offers traders the opportunity to make more money than they could from other forms of trading. Traders can buy a stock and sell options contracts on it.

These contracts give you a chance to profit when the underlying stock rises and falls when that underlying stock goes down.

If you’re already familiar with how trading works in the stock market, then you can go for options trading in India. The reason is simple — options are easier, safer, and cheaper to trade than other investments such as stocks, bonds, or real estate.

What are Options and Options Trading?

Options are financial contracts that give the holder the right, but not the obligation to buy or sell a security at a predetermined price and time. The holder of an option may buy it for a premium and hold it as long as they wish. The seller of an option may sell it for a premium and must deliver it to the buyer before its expiration date.

Options trading in India is a way to buy or sell stocks, indices, ETFs, and other securities at prices that are pre-determined by market makers, who are called market makers in India.

Best Stocks For Options Trading

Here is a list of some of the best option stocks-

S. No.

Company

Industry

1.

Adani Enterprises

Conglomerate

2.

Apollo Tyres

Tyre Manufacturing

3.

Bajaj Auto

Automotive

4.

Dalmia Bharat

Conglomerate

5.

HDFC Bank

Banking

Factors to Consider Before Choosing Stocks for Options Trading

  • Range of Maturities

The options market in India is one of the most extensive in the world. There are over 100 different trading instruments available on the spot market alone, and they include several exotic and complex contracts such as short straddles, iron condors, and calendar spreads.

This makes it easy to find a contract that fits your needs, regardless of whether you're looking for an exotic or simple contract.

  1. Volatility

One of the main reasons that people choose options trading in India is because it's more volatile than traditional stock trading methods.

In fact, some experts believe that there's no better way to make money than by using options to speculate on volatility levels--which makes them ideal for investors who want an edge over the competition by taking advantage of unexpected events such as geopolitical events or economic fluctuations that could cause prices to rise or fall unexpectedly before their expiration date (which is usually within three months).

  1. Intrinsic Value

Intrinsic value is the value of a financial instrument that isn't related to its current market price. It's often called the "intrinsic" value because it has nothing to do with what the market is currently paying for an instrument.

The intrinsic value of an option contract is determined by its future cash flows, which are usually determined by an options payoff chart.

  1. Time Value

Time value is the degree to which an option's price rises as time passes. A call option has more time value than a put option because the buyer of a call has more time until they have to exercise their right to buy something at a given price—and therefore more time in which to realize their profit from exercising their option before any expiration date comes around again.

  1. No Obligation

Options trading in India is a business that is still new and it's not a long-term investment. Therefore, you should only trade options if you are ready to take risks and make money. 

You need to be aware of the fact that there are no guarantees or obligations in this industry and you will be responsible for all losses incurred by your trading activities.

You may also want to read Best Option Trading Strategies

Best Option Stocks: Overview

1) Adani Enterprises

Adani Enterprises Limited is a holding company. Its often found to be on the list of the best stock options to buy today. The Company is an integrated infrastructure with businesses spanning coal trading, coal mining, oil and gas exploration, ports, multi-modal logistics, power generation and transmission, gas distribution, and edible oil and agro commodities.

Its segments include Integrated Resources Management, Mining, Solar Manufacturing, Airport, and Others. Integrated Resources Management provides end-to-end procurement and logistics services. 

2) Apollo Tyres

Apollo Tyres Limited is an India-based company, which is engaged in the manufacturing and sale of automotive tires. The Company operates through the Automobile Tyres, Tubes, and Automobile Flaps segment. Its geographical segments include APMEA, Europe, and Others.

APMEA segment includes manufacturing and sales operations through India and includes entities in the United Arab Emirates, Thailand, Malaysia, and South Africa. Europe segment includes manufacturing and sales operations through the entities in Europe. The others segment comprises sales operations in the Americas and all other corporate entities.

3) Bajaj Auto

Bajaj Auto Limited is an India-based manufacturer of motorcycles, and three and four-wheeler vehicles. It is frequently observed in the top option stocks.

The Company is engaged in the business of development, manufacturing, and distribution of automobiles such as motorcycles, commercial vehicles, electric two-wheelers, and parts. The Company's business segments include Automotive, Investments, and Others.

4) Dalmia Bharat

Dalmia Bharat Limited is an India-based cement manufacturing company. The Company is principally engaged in the business of manufacturing and selling of cement and its related products and refractory products.

The Company’s segments include the Cement division and Others. The Cement division is engaged in producing various grades of cement and its related products. 

5) HDFC Bank

HDFC Bank Limited (the Bank) is an India-based private sector bank. The Bank caters to a range of banking services covering commercial and investment banking on the wholesale side and transactional/ branch banking on the retail side.

The Bank's Treasury segment primarily consists of net interest earnings from the Bank's investment portfolio, money market borrowing, and lending, gains or losses on investment operations, and on account of trading in foreign exchange and derivative contracts. The Retail Banking segment serves retail customers through the Bank's branch network and other channels.

Conclusion

Options trading in India has gained immense popularity in the recent past. It is indeed an exciting and lucrative form of investment. However, it also needs expertise and knowledge to find the best option trading shares successfully. Therefore, you need to know how to trade options effectively to make it your profit tool.

The very first and foremost thing that you need to know about best shares for option trading is that it is a derivatives trading platform for both institutional traders as well as retail players; hence, there will always be some dynamics of risk involved in the entire process.

Disclaimer: The views expressed in this post are that of the author and not those of Groww.

To read the RA disclaimer, please click here
Research Analyst - Bavadharini KS

Disclaimer

The stocks mentioned in this article are not recommendations. Please conduct your own research and due diligence before investing. Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges. As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. NBT do not guarantee any assured returns on any investments. Past performance of securities/instruments is not indicative of their future performance.
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